To say that the US stock market has had a manic-depressive Christmas season would be an understatement. The half-day of trading on the 24th witnessed the worst Christmas Eve dips in the recorded history of the Down Jones Industrial Average as American blue chips dropped by 2.9%. Meanwhile the S & P 500 lost 2.7% on the day as the Nasdaq dipped by 2.2%. And yet when markets reopened on the 26th, numbers were back up thanks largely to figures issued by Mastercard showing a healthy retail season, particularly in respect of online shopping led by Amazon. As a result, the Dow rose by 1,000 points after the Gregorian Christmas holiday – its biggest ever single day points gain. Likewise, all three major indexes on the New York Stock Exchange showed their highest ever percentage increase since 2009.
On the 27th, trading started poorly but rebounded across the Dow, S & P and Nasdaq by the closing bell. Friday saw the opposite trend with late loses erasing midday gains. Still, the abbreviated week ended with stocks rising overall, the first weekly gain in a month.
While some might say “all’s well that end’s well”, with one more day of trading left before the New Year holiday, when it comes to the US markets, the word is volatility. On the one hand, a manic over-reaction to the rather conservative (aka middle of the road) and completely expected pre-Christmas rate hikes by the Fed led to unnecessary panic selling which was then counterbalanced by the retail upsurge as reported by Mastercard after the 25th. Yet in spite of this, last week’s manic depressive trading leaves more questions than answers.
Although the stock markets have weathered US government shutdowns before, unease over Donald Trump’s trade war with China continues to hinder any breakout of bullish optimism and this is before one delves into just how overheated many US tech stocks remain. After last week’s news that US trade officials will travel to Beijing for further talks beginning sometime during the week of January the 7th, Donald Trump’s recent phone call to Chinese President Xi Jinping at least offers some hope that a trade thaw might at long last be at hand.
The Chinese newspaper Global Times reported on the phone call in the following way:
“Trump wished Xi and the Chinese people a happy new year, saying that the US-China relations are very important and closely followed by the whole world.
He said he values the great relations with Xi, adding that he is pleased to see the teams of both countries are working hard to implement the important consensus reached between him and Xi during their meeting in Argentina.
Trump said relevant talks and coordination are producing positive progress. He hopes results will be reached to the benefit of both US and Chinese peoples as well as people of all nations.
Xi, for his part, extended best wishes to Trump and the US people upon the arrival of the new year.
Xi said both he and Trump hope to push for a stable progress of the China-US relations, adding that the bilateral ties are now in a vital stage.
The Chinese president said he and Trump had a very successful meeting early this month and reached important consensus in Argentina.
The teams from both countries have since been actively working to implement such consensus, he said, expressing hopes that both teams can meet each other halfway and reach an agreement beneficial to both countries and the world as early as possible.
Xi said next year marks the 40th anniversary of the establishment of diplomatic ties between the United States and China, adding that China attaches great importance to the development of bilateral relations and appreciates the willingness of the US side to develop cooperative and constructive bilateral relations.
China is willing to work with the United States to summarize the experience of 40 years of the development of China-US relations, and strengthen exchanges and cooperation in fields of economy and trade, military, law enforcement, anti-drug operations, local issues and culture, Xi said.
Xi added that China is also willing to work with the United States to maintain communication and coordination on major international and regional issues, respect each other’s important interests, promote China-US relations based on coordination, cooperation and stability, and let the development of bilateral relations better benefit the two peoples and people around the world”.
The two also discussed further cooperation over the Korean peace process. Donald Trump later took to Twitter to summarise his views on his discussion with the Chinese President. The US President said:
“Just had a long and very good call with President Xi of China. Deal is moving along very well. If made, it will be very comprehensive, covering all subjects, areas and points of dispute. Big progress being made!”
Just had a long and very good call with President Xi of China. Deal is moving along very well. If made, it will be very comprehensive, covering all subjects, areas and points of dispute. Big progress being made!
— Donald J. Trump (@realDonaldTrump) December 29, 2018
Of course, one of the elephants in the room remains the ordeal of Huawei CFO Meng Wanzhou, as well as the accompanying drive by Washington to force its traditional bilateral partners to drop all government contracts with Huawei to build 5G networks and supply other important hardware. After applying pressure to both Canada and Australia, now the US is trying to convince Britain to detach itself from a planned Huawei 5G network under the defamatory and Sinophobic guise that such a commercial/civilian mobile system is a threat to national security.
Yet even in spite of the McCarthyite campaign against Huawei engineering by Washington, the Chinese company saw a 21% rise in profits in 2018. This yet again proves that as markets throughout Asia, Africa and Latin America expand, the US and its traditional allies are going to represent a deceased market share for companies looking to trade worldwide. Even as Huawei products are difficult to obtain in the US, the company still managed to overtake the US giant Apple to become the world’s largest seller pf smart phone technology in 2018.
Throughout all of this, China has thus far been able to astutely compartmentalise the US war on Huawei and its CFO on the one hand and trade negotiations on the other. Trump’s own personal volatility still leaves more questions than answers when it comes to just what will be accomplished during bilateral trade talks in early January, but clearly the global markets including Wall Street are yearning for stability in what has been a very unpredictable year.
Because of this, there stands a chance that due to China’s rational ability to compartmentalise its grievances against the US and Canada over a number of issues including the sustained violations of Meng’s human rights on the one hand versus China’s simultaneously firm desire to reach an open win-win trading settlement with the US at a time when China is already opening its markets to foreign imports and capital more than during any previous period in PRC history – a deal could be within reach. Ultimately as it was Trump who defied China’s spirit of openness in order to retreat behind the self-defeating walls of protectionism, it is likewise up to the US to at long last end a one sided trade war of its own making. The markets are clearly awaiting a decision that will build much needed investor confidence during a period of supreme volatility.